It is a fact that there are many benefits of establishing your own business. That’s where the sole proprietorship, the most basic business structure, comes in. Being your own boss allows you to work from home, make your own decisions, keep all profits, and apply business growth methods. So, if you wish to work as a sole trader, you might be wondering how do I register as a sole trader after considering these benefits.
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What is a Sole Trader?
A person who starts his business as a self-employed individual is called a sole trader. To be a sole trader, you don’t need much money, and you don’t need directors, shareholders, or partners to share your liabilities. Here, you have the sole authority to control and make key decisions for your business. Furthermore, you receive your entire profit.
Although establishing your own company has numerous advantages, it also has certain disadvantages. You have unlimited liability, which means that if you owe a significant debt, you are liable for repaying it using your assets.
How can I become a Sole Trader?
You don’t have to be enlisted as a self-employed person to be considered as a sole trader. However, HM Revenue & Customs classifies you as a self-employed person in the event that you:
- Run it as a sole proprietorship (which means you sign contracts, deal with vendors, and hire personnel under your name)
- Own a company
It implies that you are a self-employed individual by default in the event that you begin trading.
How Do I Register as a Sole Trader?
Companies House does not need sole traders to register their businesses. However, you must inform HM Revenue & Customs about your business to report your earnings and pay taxes on them. You can register as a sole trader with the help of the following way:
- Fill out the online self-employed registration form to get started, we’ll get all the necessary details from you and submit an application to HM Revenue & Resource on your behalf.
What are the taxes to be paid by a Sole Trader?
When you are registered as a self-employed worker, taxes are allocated to you by the HM Revenue and Customs. On that account, any person working as a sole proprietor or running his own company, or having a partnership in a business must pay the Income taxes and National Insurance Contributions(NICs).
When Should I Register for VAT as a Sole Trader?
As a sole trader, you will need to register for VAT if your annual turnover is above then the VAT given (by HMRC) threshold. This is because you charge your clients VAT on VAT-able deals and pay it to HM Revenue & Customs in case you’re VAT enrolled. However, you’ll recover the VAT you spend on the purchase of items and services.
So you have got the answer to what is a sole trader how do i register as a sole trader, what are the taxes to be paid by a sole trader. While working out how much you need to pay, you should be well informed of your records. And if you are running a private company (Ltd) or (LLP), you need to pay the corporation tax on your business profits.
Chartered accountants prove to be very beneficial for sole traders. Although you are not required to submit numerous accounts to HM Revenue & Customs as a local company, a professional can still assist you in exploring your self-assessment (each year) and maintaining a log of your solicitations (invoices) and costs. They also help you calculate the tax you need to pay on your trading profits, sparing cash, and make sure that your company is tax efficient.
Therefore, let our experts gather all of the essential data and submit it to HMRC on your behalf. Fill out this form, and We will take care of the rest! Contact us now to take professional advice on the registration process!
Disclaimer: This blog contains general information about how to register as a sole trader.